PM urged not to cut taxes in 2016 Budget

Former Reserve Bank governor Bernie Fraser has signed the letter, along with a range of economists and legal experts.


The full-page open letter in Fairfax press is addressed to Prime Minister Malcolm Turnbull.

It urges him to consider the pursuit of equity and fairness and argues collecting more tax would make Australia a better place to live and work.

The Australia Institute coordinated 50 signatures for the letter.

Its executive director, Ben Oquist, has told the ABC in the lead-up to a federal budget, tax cuts are often offered because they are politically popular.

“The reality is the community increasingly wants to see services funded properly, and you need a strong tax base to fund those services. And now is not the time for tax cuts. And, in fact, tax cuts — and, in particular, company tax cuts — being made in the current budget environment would be fiscally irresponsible.”

Australia’s company tax rate has been at 30 per cent since the early 2000s.

The option of a corporate tax cut remains a possibility for Treasurer Scott Morrison in his May 3rd budget.

Mr Turnbull is preparing to reset the Government’s fiscal agenda after the states rejected a proposal to levy their own income taxes.

Former Reserve Bank governor Bernie Fraser co-signed the open letter to Mr Turnbull and says there has been a failure of fiscal policy by successive governments.

Mr Fraser has told the ABC the Government’s claim that the economy would grow if there was company-tax relief has not proven to be the case historically.

“Tax is only one element in the decisions that corporations make about whether or not they will invest. And it’s, by no means, the major consideration. Companies are not going to invest if they can’t be sure of having a market or an appropriate price for their output.”

Australian Council of Trade Unions president Ged Kearney says the public is tired of being told they have to accept cuts to services like health and education.

An Essential Research poll of 1,000 people, released by the ACTU, indicates only nine per cent believe the system is working.

Ms Kearney says the Government has to work harder to ensure large corporations pay their fair share of tax.

“It’s not fair. And we know that 38 per cent of corporate entities paid no tax at all in 2013-14, and we think that it’s time the Government actually said, ‘Australians deserve good services, they deserve decent education and health systems, and we’re going to make sure we have the revenue to do that.'”

Modelling conducted for the Melbourne Economic Forum by Victoria University’s Centre of Policy Studies has also been released.

It shows a cut in the company-tax rate could leave Australians worse off by an estimated $1,600 dollars each.

Ms Kearney says the Government’s ideas about the benefits of corporate-tax cuts are outdated.

“This is an age-old argument that is just not being borne out anywhere. What we do know stimulates the economy is making sure that consumers, that everyday Australians, have enough money in their pocket to spend it. A vast majority of the economy is run by workers, everyday people, not by companies. Companies don’t drive the economy. It’s making sure that people have a decent income, they have a decent standard of living, so they can go out and spend money in our economy and keep the wheels turning.”